According to the Internal Revenue Service (IRS) Revenue Procedure 2006-13 , officials have decided upon safe harbor methods for the fair market value determination. The new IRS guidance instructs tax preparers to use the methodology provided in A-12 of §1.401(a)(9)-6 with the following modifications:
- All front-end loads and other non-recurring charges assessed in the twelve months immediately preceding the conversion must be added to the account value.
- Future distributions are not to be assumed in the determination of the actuarial present value of additional benefits.
- The exclusions provided under paragraphs (c)(1) and (c)(2) of A-12 of §1.401(a)(9)-6 are not to be taken into account.
The simplified safe harbor method provided in Section 4 of this revenue procedure is available where such a conversion occurs before January 1, 2006, the IRS said.